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BP Business Economic Loss Claim Appeal 2017-202:Revenue From Tort Cases Improperly Excluded As “Insurance Proceeds”


The following is an Appeal Panel Decision issued pursuant to Section 6 of the BP Deepwater Horizon Economic & Property Damages Settlement Agreement and the Rules Governing the BP Appeals Process. Links may have been added to assist the reader. The original decision may be found here, as well as a glossary of BP Settlement terms

Claimant appeals the denial of its BEL claim for failure to satisfy the causation requirements of Exhibit 4B. Claimant operates three medical clinics in the New Orleans, Louisiana area. Claimant’s primary patient base is tort claim referrals from attorneys in which treatment is provided under an agreement that payment will be made upon settlement of the patient’s personal injury case. Typically, the source of these funds is insurance companies that insure the at-fault parties in the tort claims. Claimant does not accept medical insurance and only a minimal number of patients pay cash.
The program accountant excluded revenue of $96,801.79 in May of 2009 because he deemed it to be insurance proceeds that were not typically earned as revenue in the normal course of Claimant’s business. Claimant argues that the accountant did not understand that third-party insurance proceeds are the source of its main revenue stream in the normal course of its operations. On appeal, Claimant argues that this was error and that recognition of the excluded revenue would
allow it to pass causation.
In response, BP argues that Policy 328 requires the exclusion of insurance proceeds in the calculation of revenue. BP goes on to urge that even if the excluded revenue is included, Claimant still fails the V-Shaped Revenue test. Thus, BP argues that Claimant’s appeal is moot.
Calculation Note 9 captures the program accountant’s approach to the revenue in issue:
The DWH Accountant noted increased revenue in May 2009. Per the claimant, the increase was “due to lawsuits settling and payments rendered out of settlements for medical treatment”. The claimant also submitted a QuickBooks computer generated “Payment Day Sheet” detailing payments in the amount of $96,801.79, indicating this was the revenue received from the lawsuits settled. The DWH Accountant made adjustment 4 and 5 to decrease revenue by $(96,801.79) as this revenue is deemed to be insurance proceeds, thus excludable per the Settlement Agreement. The amount was reclassified as “Other – N/A”.
Despite efforts by the Claimant to explain the unusual nature of its revenue stream, the program accountant obviously concluded that as insurance proceeds, the May 2009 payments required exclusion. Claimant submitted a Quickbooks detail of the amounts realized on behalf of each patient for May 2009 in support if its request for reconsideration. Claimant supplemented this with an affidavit from its owner explaining the sources of the third-party insurance payments and the fluctuating nature of their timing. Importantly, Claimant explained that insurance payments from the settlement of patient lawsuits are a significant part of its normal revenue stream.
In mechanically excluding this revenue as “insurance proceeds” without further examination of its true role in the normal course of Claimant’s operations, the accounting vendor exceeded his professional judgment. Accordingly, this claim must be remanded to the Settlement Program. BP included a spreadsheet in its memorandum, arguing that Claimant will still be unable to pass the V-Shaped causation test. However, calculation of the claim with the May 2009 revenue included is for the Claims Administrator to determine, not BP. For the foregoing reasons, Claimant’s appeal is sustained and the claim is remanded for further proceedings consistent herewith.

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